Turbulent times at Tesla: Mass layoffs, slow sales and suspected arson

Several newly-unemployed workers told Io Dodds that the layoffs seemed to strike chaotically, without rhyme or reason, with Elon Musk’s actions resulting in one investor declaring: “Only him and Kanye West have reached this level of people’s distaste”

(AP/Getty)

Jordan turned up at work on Sunday morning expecting a normal shift as a Tesla test driver.

But instead at the office they were told they couldn’t drive — their job was to train the electric carmaker’s self-driving software by riding along with it as it navigated real city streets — and asked to wait around on standby until the issue was resolved. "Don’t worry about it," a manager told them.

So Jordan waited for eight hours, and only learned on Monday morning that they were among the estimated 14,000 Tesla employees who were laid off across the world this weekend.

"It felt kind of s****y," Jordan told The Independent. "They could have sent me home. They could have given me the heads up." (The Independent agreed to refer to Jordan by a pseudonym to protect them from potential retaliation.)

Several newly-unemployed workers told The Independent the layoffs seemed to strike chaotically, without rhyme or reason. Some who’d been reprimanded repeatedly stayed on, while others with clean records were ejected. Some were laid off from already overworked teams, others saw the writing on the wall when their daily tasks dropped off as sales did.

This week’s layoffs appeared to be the largest in Tesla’s recent history, targeting 10 per cent of its roughly 140,000 employees, ranging from salesfolk in China through factory workers in Texas to engineers in California.

Simultaneously, Tesla lost two prominent executives: Drew Baglino, a long-serving lieutenant to chief executive Elon Musk who had been with the company for 18 years, and Rohan Patel, a former climate adviser to Barack Obama who led Tesla’s dealings with governments and regulators.

The departures come after a string of problems for the world’s most valuable car company, ranging from a suspected arson by environmentalist militants at Tesla’s "gigafactory" in Germany to a spate of recalls and government probes that have called the quality of its vehicles into question.

Emails sent out to Tesla employees in the small hours of Monday morning, and seen by The Independent, blamed Tesla’s "rapid growth" for causing "duplication of roles and job functions in certain areas", and said the cuts will enable it to be "lean, innovative, and hungry" in future.

"There is nothing I hate more, but it must be done," wrote Musk – in the version of the email that was sent to employees who stayed. Those laid off received a version that was signed simply "Tesla".

But investors and financial analysts challenged that rationale, pointing to the disastrous recent announcement that Tesla had shipped 8.5 per cent fewer cars in the first three months of 2024 than the same time period last year.

"It’s a horrible thing for the company. It’s a sign that they can’t sell cars," Ross Gerber, a wealth manager and longtime Tesla shareholder who recently downgraded the company’s status in the investment fund he runs, told The Independent.

"Elon’s assumptions about capacity and future demand have been completely incorrect, so he’s making the adjustments necessary. But it’s a huge step back for Tesla."

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‘I think they were expecting to sell more cars’

Those laid-off struggled to figure out why they’d be selected over other employees.

"I’m used to a culling of familiar faces with ‘performance reviews,’ but I was in good standing," a laid-off customer care worker in the US told The Independent.

"I don’t know why we were the 10 per cent. Is it because I had a conversation with HR last month about a social concern?” the anonymous worker asked. “Someone heard a rumour that it had to do with desk tidiness, which seems ridiculous. But I’m left grasping at straws."

Elon Musk (Getty Images for Breakthrough Pr)

Contrary to Musk’s email, the worker said that their department was understaffed, not overstaffed.

"I was on a team with a huge backlog of work. There was never a second of downtime. It was a burnout environment," they said.

That was not the case for Deitrich Dickson, 27, who had worked for nearly six months building Tesla’s Model 3 car at its factory in Fremont when he got the layoff email. Shocking as it was, he’d "kind of seen it coming".

I think they over-hired because they were expecting to sell more cars

Laid-off Tesla worker

Tesla famously doesn’t like to keep a large inventory of cars lying around. As often as possible, it builds a car only after it has received an order, which means there is usually a delay before the customer gets it.

Sometimes, Dickson’s division would be a flurry of activity as workers raced to meet a large number of orders. But just as often, he told The Independent, they’d hit their targets early and have to stop working.

"There would be a lot of days where we would just stand there for three to four hours because we’d met our quota," Dickson said. "I think they over-hired because they were expecting to sell more cars."

Indeed, Tesla’s shock decline in sales for the start of 2024 was its first year-on-year drop since before the pandemic.

So why is it happening?

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‘Only Kanye West is hated more’

For one thing, Tesla faces growing opposition for its long-held EV crown, not only from legacy carmakers such as Toyota and Volkswagen but from electric-only upstarts such as the Chinese EV giant BYD.

A recent report in The New York Times highlighted how Tesla’s sweetheart deal with Chinese officials to build a factory in Shanghai helped kickstart the country’s EV market, ironically allowing local firms such as BYD to begin undercutting Tesla’s expensive premium vehicles.

Despite this danger, Musk has reportedly sidelined Tesla’s long-awaited low-cost EV project, veering from his original "master plan" for the company and potentially ceding a whole segment of the market to his rivals.

"Musk’s foolhardy detour to supercars and monster trucks has opened the door for Chinese automakers to finish the job that Musk started," said Len Sherman, a former auto industry consultant turned professor at Columbia Business School, referring to Tesla’s new Cybertruck and its upcoming second edition Roadster.

Tesla co-founder and CEO Elon Musk stands in front of the shattered windows of the newly unveiled all-electric battery-powered Tesla’s Cybertruck at Tesla Design Center in Hawthorne, California on November 21, 2019 (AFP via Getty Images)

Meanwhile, the EV market as a whole has been growing more slowly, with sales in the first three months of this year increasing only 2.6 per cent from last year compared to 46 per cent between 2022 and 2023.

Yet according to Gerber – a confessed Tesla fan who says he wants to see the company succeed – the biggest problem is Musk himself.

"There’s really no excuse for not being able to sell the inventory that they have," Gerber said. "[Teslas] are the best cars on the road. It’s like not being able to sell golden watches at a discount."

The blame, he argues, lies squarely with Musk’s increasingly toxic and combative public behaviour, marching headlong into repeated scandals over antisemitism, conspiracy theories, and far-right politics, as well as his highly distracting acquisition of Twitter.

"He’s trashed the Tesla brand," Gerber said. "Is there any group of people that he hasn’t insulted other than white people...? Only him and Kanye West have reached this level of people’s distaste for him."

Gerber also blamed Tesla’s historic refusal to invest in conventional advertising, and its decision to continually cut its prices in the hope of keeping sales numbers high – a tactic that ultimately backfires because customers start delaying their purchases in expectation of further price drops.

The quality, at least in customer care, is going to get worse.

Laid-off Tesla worker

Ultimately, Gerber believes the layoffs will prove a "huge strategic mistake", especially in regions such as China and Europe whose EV sectors are still budding.

“Competitors will hire all the Tesla employees that are let go, just for their knowledge and backgrounds," Gerber said. He added that Tesla’s cuts to customer care are dangerous because many customers already have a "horrible" experience.

The person laid off from Tesla’s customer care team echoed that assessment.

"The quality, at least in customer care, is going to get worse," they said. "It’s already pretty bad, with hour-long hold times and a skeleton crew of overworked agents... we needed more people, not fewer."

For Jordan, whose job was to ensure that Tesla’s autopilot software doesn’t crash its cars, the risk is even greater. "I think getting rid of anyone in that department makes [autopilot] less safe," they said.